In 2011, Chris Dixon wrote a post titled Selling pickaxes during a gold rush. He explained the dynamics of pickaxes as follows:
When a major new technology trend emerges — say, the rise of online video or social media — entrepreneurs can try to capitalize on the trend by creating a consumer product (mining for gold), or by creating tools to enable consumer products (selling pickaxes).
The idea of pickaxes has now become a mainstream, buzzy term used by VCs and entrepreneurs all throughout startupland. Like online video or social media in the mid to late 2000′s, we are now seeing similar companies within frontier tech aiming to be the pickaxes of their given vertical.
With more nascent sectors, infrastructure/platforms are often one of the key factors that enables that given sector to break out (think charging stations for EVs, early Oculus/Vive dominance for VR, and even earlier moves within ATC & Fly/No Fly for Drones). One such area I’ve been spending some time in recently that seems to be overcrowded is undoubtedly satellite launchers, and others agree.
Doug Messler took notice as well and documented just a few of the more well-known launchers here , while SpaceWorks even included a case study on the rise of smallsat launchers in this year’s report (slide 15).
In the past 4 months we have seen over 15 early-stage startups fundraising for launch services for satellites (most commonly sub-50kg sats). Here are the catalysts for this:
- Many new satellite startups are emerging from the agile development trend made famous by companies like Planet Labs which rely on constellations of satellites in low-earth orbit (LEO). These nano/microsats are incredibly cheap to build but suffer one major flaw…
- Launching is very expensive. Spaceflight projects upwards of $295K for a 3U CubeSat rideshare, and all the way to $1.75M for a 50kg satellite.
- The majority of today’s launches occur as secondary payloads on larger vehicles (like those owned by SpaceX or Orbital ATK). These launches happen irregularly, can suffer massive delays, and the satellite companies have almost no leverage in the event that something doesn’t go according to plan.
- 3000+ nano/microsats are expected to be launched by 2020. A smaller number of smallsats will also be launched in this time.
- As more of these startups/constellations get going, many of the micro/nanosats suffer from poor reliability as well as lack of adjustability once in orbit, so in order to keep a constellation working reliably, companies will have to continually be replacing satellites over time.
All of these points lead us to a massive race by startups to provide launch services hoping to solve the cost, supply, and frequency for the coming space economy.
While the general premise makes sense, differentiation between these launch providers continues to be difficult to sift through, especially when many are in early stages of testing and won’t be launching for at least a few years (with the exception of a few like Rocket Lab). In addition, as Bilal astutely points out in his tweet above, it will be a race to the bottom.
As I previously alluded to, I am a firm believer that infrastructure plays will continue to generate alpha across many areas of frontier tech, and will be the first dominoes to fall that will lead to massive market expansion, especially in areas like space. However, in the power law-driven world of VC, you often have to be contrarian to be right and I have doubts about how contrarian launching satellites is today.
This post originally appeared in my notes.